London midday: Banks pace decline as stocks tumble on SVB woes

London stocks had tumbled by midday on Monday, with banks under the cosh again as the fallout from the collapse of Silicon Valley Bank continued to rattle markets.

The FTSE 100 was down 1.8% at 7,610.33. At the same time, gilt yields slid as market participants scaled back Bank of England and Federal Reserve rate hike expectations in the wake of the SVB drama. Yields move inversely to bond prices.

The 10-year yield on gilts was down 22 basis points at 3.41%, while the 2-year yield on gilts was 20 basis points lower at 3.32%.

Investors were mulling news that HSBC has bought the UK arm of the stricken US bank for a nominal £1. The acquisition took place after a night of frantic negotiations involving government ministers and Bank of England officials.

Talks were held over the weekend on a private sale of SVB UK and a plan to help depositors in the lender in an effort to avoid a state bailout. US regulators on Sunday evening said that SVB’s American depositors would have access to all of their money on Monday.

"This acquisition makes excellent strategic sense for our business in the UK. It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally," said HSBC chief executive Noel Quinn.

Chancellor Jeremy Hunt said customer deposits at SVB UK will be protected, with no taxpayer support through the rescue deal with HSBC.

Russ Mould, investment director at AJ Bell, said: "Despite the best efforts of governments and regulators, the market was still very edgy on Monday as investors considered the fallout from SVB’s collapse.

"There’s plenty to worry about whether it be the conflict in Ukraine, inflation, rising interest rates and now a potential banking crisis has been added to the mix. Little surprise people are feeling a bit spooked.

"For now, the panic which set in late last week appears to have been contained but whether the market can regain the confidence which saw the FTSE 100 hit a record high earlier this year remains to be seen.

"The funding environment for technology and start-up companies is certainly looking a lot less healthy and focus may start to turn to the asset managers and private equity funds which are invested in these firms."

A long list of companies issued statements on Monday to reassure investors about their exposure to SVB, including online card and gift retailer Moonpig, media group Future and Auction Tech.

Unsurprisingly, banks were among the worst performers on the top-flight index. HSBC was nearly 4% lower, while Standard Chartered, Barclays, Lloyds and NatWest also fell.

Elsewhere, insurer Direct Line fell nearly 6% after saying it swung to a full-year loss as it took a hit from inflation, and warning that 2023 earnings will be impacted by higher-than-expected claims inflation in the motor business.

In the year to the end of December 2022, the company swung to a pre-tax loss of £45.1m from a profit of £446m the year before, while operating profits slumped 94.6% to £32.1m. Analysts had been expecting pre-tax profit of £43m and operating profit of £70m.

Direct Line pointed to elevated motor claims inflation, higher-than-expected weather event claims, new regulatory changes and "challenging" investment markets.

British American Tobacco was hit by a downgrade to ‘neutral’ at JPMorgan.

Market Movers

FTSE 100 (UKX) 7,610.33 -1.78%
FTSE 250 (MCX) 18,962.80 -2.04%
techMARK (TASX) 4,530.84 -1.43%

FTSE 100 - Risers

Endeavour Mining (EDV) 1,688.00p 2.30%
United Utilities Group (UU.) 1,047.00p 1.50%
Convatec Group (CTEC) 219.80p 1.38%
Reckitt Benckiser Group (RKT) 5,824.00p 1.29%
National Grid (NG.) 1,061.00p 1.05%
Fresnillo (FRES) 729.60p 1.02%
Severn Trent (SVT) 2,792.00p 0.94%
Frasers Group (FRAS) 774.00p 0.85%
Unilever (ULVR) 4,086.00p 0.42%
GSK (GSK) 1,397.80p -0.06%

FTSE 100 - Fallers

Standard Chartered (STAN) 702.00p -5.11%
Ocado Group (OCDO) 429.80p -4.72%
Melrose Industries (MRO) 155.15p -4.52%
Prudential (PRU) 1,174.00p -4.44%
Beazley (BEZ) 558.00p -4.04%
Aviva (AV.) 431.90p -3.96%
St James's Place (STJ) 1,154.00p -3.91%
Entain (ENT) 1,259.00p -3.89%
Legal & General Group (LGEN) 242.40p -3.81%
Barclays (BARC) 151.44p -3.80%

FTSE 250 - Risers

Bakkavor Group (BAKK) 108.00p 3.85%
QinetiQ Group (QQ.) 337.60p 2.74%
Centamin (DI) (CEY) 103.50p 1.57%
Vietnam Enterprise Investments (DI) (VEIL) 565.00p 1.44%
Bluefield Solar Income Fund Limited (BSIF) 136.00p 0.74%
Volution Group (FAN) 408.50p 0.74%
Fidelity China Special Situations (FCSS) 246.00p 0.61%
Caledonia Investments (CLDN) 3,515.00p 0.57%
W.A.G Payment Solutions (WPS) 80.00p 0.50%
Templeton Emerging Markets Inv Trust (TEM) 148.80p 0.40%

FTSE 250 - Fallers

Bank of Georgia Group (BGEO) 2,500.00p -7.75%
Virgin Money UK (VMUK) 152.45p -7.33%
TI Fluid Systems (TIFS) 109.00p -6.36%
Direct Line Insurance Group (DLG) 157.35p -6.14%
Darktrace (DARK) 264.40p -5.71%
TBC Bank Group (TBCG) 2,235.00p -5.70%
Just Group (JUST) 85.85p -5.35%
National Express Group (NEX) 131.50p -5.33%
IWG (IWG) 174.40p -5.32%
Jupiter Fund Management (JUP) 134.70p -5.27%